“After Nov. 15, 2011, servicers may not refer any new
Fannie Mae foreclosure or bankruptcy cases in New York to Steven
J. Baum PC,” Fannie Mae said in servicing notice that day.

Freddie Mac announced its ban Nov. 10. Both companies said
the Baum firm would continue to work on matters referred before
the effective dates. Neither said why the firm was being
suspended.

Last month, Steven J. Baum PC, one of the largest
foreclosure law firms in New York state, agreed to pay the U.S.
$2 million and change its practices to resolve a probe of its
foreclosure filings. The agreement concluded an investigation
into whether the firm filed misleading pleadings, affidavits and
mortgage assignments in courts, according to a statement by U.S.
Attorney Preet Bharara in Manhattan. The settlement didn’t
constitute a finding of wrongdoing.

Brad German, a spokesman for McLean, Virginia-based Freddie
Mac, said the company doesn’t comment on why it drops law firms
from its list.

“We add and subtract designated counsel all the time,” he
said in a phone interview today.

Amy Bonitatibus, a spokeswoman for Washington-based Fannie
Mae, said that, beyond the servicing notice, she could only say
that “Fannie Mae has permitted servicers to transfer existing
cases from the Baum firm to new counsel.”

Accusations

Steven J. Baum PC, located in Amherst, New York, just north
of Buffalo, has attracted lawsuits and fines for its actions
during the housing crisis. It has been accused of overcharging,
filing false documents and representing parties on both sides of
a mortgage transfer. On Oct. 28, a New York Times column
reported that the Baum firm held a Halloween party last year
during which employees dressed as foreclosed-upon homeowners.

New York Attorney General Eric Schneiderman is
investigating the Baum firm, two people familiar with the matter
said in May. Danny Kanner, a spokesman for Schneiderman,
declined to comment on the investigation.

Home Seizures

Earlier this year, Florida foreclosure firm Law Offices of
David J. Stern ceased processing home-seizure cases after Fannie
Mae, Freddie Mac and home-loan servicers, including the largest
U.S. banks, dropped it.

“GMAC Mortgage no longer uses the Steve Baum law firm and
began suspending its activity with that firm in September,”
Gina Proia, an Ally Financial Inc. spokeswoman, said in an e-mail.

Thomas Kelly, a JPMorgan Chase & Co. spokesman, said the
bank doesn’t comment on vendor relationships and wouldn’t say
whether it continues to use the Baum firm.

“We have terminated that relationship,” Lawrence Grayson,
a Bank of America Corp. spokesman, said in a phone interview.
That occurred before Fannie Mae’s and Freddie Mac’s
announcements, Grayson said.

“We are evaluating and monitoring the firm and we will
respond in the best interest of our customers and investors,”
Vickee Adams, a Wells Fargo & Co. spokeswoman, said of the Baum
firm in an e-mailed statement.

Mark Rodgers, a Citigroup Inc. spokesman, declined to
comment on the Baum firm.

State attorneys general and federal regulators are
negotiating with banks including JPMorgan and Bank of America to
try to reach a settlement over faulty foreclosure practices.

To contact the reporter on this story:
Thom Weidlich in Brooklyn, New York, federal court at
tweidlich@bloomberg.net.